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Amazon Launches Amazon Cash (AMZN, WMT)

Now you can buy products from Amazon.com, Inc.’s (AMZN) e-commerce site using cash. The online retailer announced the launch of Amazon Cash to facilitate purchases from its site for customers who do not have a credit card or access to a bank account. To implement the system, the e-commerce site has partnered with several retailers, such as CVS Health Corporation (CVS). Customers receive a barcode on their phone if they inform Amazon’s site that they would like to pay with cash. They can add money to their Amazon account by showing the barcode at the nearest participating retailer.

Amazon’s latest payment innovation is similar to PayPal Holdings, Inc.’s (PYPL) My Paypal Cash card, which has a similar partnership with retailers that enables its customers to make cash payments on multiple sites. However, in Amazon’s case, the move benefits its e-commerce operations. Its competitor Wal-Mart Stores, Inc. (WMT) launched a “Pay with Cash” initiative for online purchases back in 2012. (See also: Walmart E-Commerce Intimidating Amazon.)

According to the National Survey of Unbanked and Underbanked Households in 2015 by the Federal Deposit Insurance Corporation (FDIC), 7 percent (9 million) and 19.5 percent (24.5 million) of U.S. households were unbanked and underbanked, respectively, in 2015. The report stated that 62.5 percent of unbanked households used cash to make purchases, and a significant majority of underbanked households used alternative financial services (AFS).

Amazon has made efforts to expand its reach by targeting this demographic. For example, the company has run promotional campaigns and offered free Prime membership to low-income households. It has also ramped up its operations in underserved neighborhoods after news reports that criticized its services in such neighborhoods. The move also benefits the company’s bottom line by helping bolster membership to its Amazon Prime program. (See also: Amazon Filing Reveals Prime Numbers for the First Time.)

Earlier this year, Baird analyst Colin Sebastian wrote that Amazon Prime membership is increasing “fastest among lower-income householders, which should drive continued incremental share gains at the expense of more discount-oriented retailers.” (See also: Amazon Prime Becoming Popular in Low-Income Households.)

 

 

Credit:.investopedia.com

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